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China to pilot property tax scheme in some regions -Xinhua

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October 23, 2021

SHANGHAI (Reuters) -The top decision-making body of the Chinese parliament said on Saturday it will roll out a pilot real estate tax in some regions, the official Xinhua news agency reported.

The State Council, or Cabinet, will determine which regions will be involved and other details, Xinhua added.

The long-mooted and long-resisted property tax has gained new momentum since President Xi Jinping threw his support behind what experts describe as one of the most profound changes to China’s real estate policies in a generation.

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A tax could help red-hot home prices that have soared more than more than 2,000% since the privatisation of the housing market in the 1990s and created an affordability crisis in recent years.

But talk of the plan is coming at a sensitive time, as the property market is showing significant signs of stress and home prices have started falling in tens of cities.

The tax will apply to residential and non-residential property as well as land and property owners, but does not apply to legally owned rural land or where residences are built on it, Xinhua said.

The pilot schemes will last five years from the issue of the details from the State Council.

The idea of a levy on home owners first surfaced in 2003 but has failed to take off due to concerns that it would damage property demand, home prices, household wealth and future real estate projects.

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It has faced resistance from stakeholders including local governments, who fear it would erode property values or trigger a market sell-off.

Over 90% of households own at least one home, the central bank said last year.

But analysts say the tax will bring in much needed revenue.

“Land sales are not a sustainable source of government revenue any more,” Capital Economics said in a note on Friday. “Gradual implementation should also mitigate fears that a tax could cause prices to crash.”

In pilot programmes rolled out in 2011, the megacities of Shanghai and Chongqing taxed homeowners, albeit just those possessing higher-end housing and second homes, at rates from 0.4% to 1.2%.

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But until now the pilot programmes have not been widened to more cities.

Analysts expect a wider pilot to first include wealthier and economically more diversified regions in eastern and southern China such as the provinces of Zhejiang and Guangdong.

“It is expected that Zhejiang is likely to be included in the reform, especially Hangzhou,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution.

Hangzhou, the base of e-commerce giant Alibaba, is China’s eighth-richest city, with economic output reaching 1.61 trillion yuan ($252 billion) last year, about 70% of Hong Kong’s gross domestic product.

($1 = 6.3839 Chinese yuan renminbi)

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Mainland China’s Reliance on Land Sales (by province) https://tmsnrt.rs/3lyvluJ

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(Reporting by Steven Bian and Engen Tham in Shanghai; Additional reporting by Ryan Woo and Liangping Gao in Beijing; editing by Kim Coghill and Jason Neely)

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Asia braces for China data, oil nears 2021 highs

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January 17, 2022

By Wayne Cole

SYDNEY (Reuters) – Asian share markets got off to a cautious start on Monday as the U.S. earnings season loomed large and a slew of Chinese economic data were expected to show the deadening effect of coronavirus restrictions on activity.

A holiday in the United States made for thin trading, but that did not stop Brent crude from extending its bull run toward last year’s peak of $86.70 a barrel.

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MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed, while Japan’s Nikkei bounced 0.8% after losing 1.2% last week

S&P 500 futures were flat, while Nasdaq futures slipped 0.1%.

The main feature of the market recently has been a rotation into value stocks and away from growth, particularly technology. The S&P 500 information technology sector, which accounts for nearly 29% of the index, has shed 5.5% this year.

With valuations still high, earnings will have to be strong to stop further losses. Overall S&P 500 earnings are expected to climb 23.1% this season, according to Refinitiv IBES, while the tech sector is seen up by 15.6%.

Companies reporting this week include Goldman Sachs, BofA, Morgan Stanley and Netflix.

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The market will be spared speeches from Federal Reserve officials this week ahead of their Jan. 25-26 policy meeting, but there has been more than enough hawkish comments to see the market almost fully price in a first rate hike for March.

There was also talk the Fed will start trimming its balance sheet earlier than previously thought, draining some of the excess liquidity from world markets.

Yields on cash 10-year Treasuries climbed to their highest in a year at 1.8%, while futures implied yield of 1.83% early on Monday.

“The implications of quantitative tightening continue to occupy markets as an earlier Fed balance sheet runoff looms,” noted analysts at Barclays.

“Meanwhile, new COVID lockdowns in China could re-aggravate global supply bottlenecks, while in both Europe and the U.S. the near-term growth outlook is now weaker and the 2022 inflation profiles higher.”

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Data out of China due on Monday are expected to show retail sales and industrial output slowed further in December. The economy is forecast to have grown 1.1% in the fourth quarter, though the annual pace is seen slowing to 3.6% from 4.9%.

BEWARE THE BOJ

A Bank of Japan (BOJ) policy meeting this week will bear watching given talk it will revise up its outlook for growth and inflation, while sources told Reuters policy makers were debating how soon they could start telegraphing an eventual interest rate hike.

While a move is unlikely this year, financial markets may be under-estimating its readiness to gradually phase out its once-radical stimulus programme.

This was one reason the yen has rallied, with the dollar slipping 1.2% last week to last stand at 114.29 but still well above major chart support at 112.52. [FRX/]

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The euro also gained 0.5% last week as the dollar eased broadly and was last changing hands at $1.1408. The dollar index was a shade firmer at 95.231, after touching a 10-week trough at 94.626 on Friday.

“We continue to think that the greenback will strengthen again before long, as we expect strong cyclical price pressures in the U.S. to mean the Fed tightens by more and for longer than investors currently discount,” argued Joseph Marlow, an economist at Capital Economics.

They see Fed rates topping 2.5% while the market has priced in a peak around 1.75-2.0%..

The risk of higher rates kept non-yielding gold restrained at $1,817 an ounce, while industrial and energy resources have benefited from resilient demand and limited supplies.[GOL/]

Oil prices have climbed for four weeks straight and such is demand that physical barrels of oil are changing hands at near record high premiums. [O/R]

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Early Monday, Brent had added another 51 cents to $86.57 a barrel and was approaching the 2021 top of $86.70 and the 2018 peak at $86.74. A break there, would take it to heights last visited in 2014.

U.S. crude also firmed 75 cents to $84.57 per barrel.

(Editing by Himani Sarkar)

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Japan machinery orders rise more than expected, govt welcomes pick-up signs

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January 17, 2022

By Daniel Leussink

TOKYO (Reuters) -Japan’s core machinery orders rose for a second straight month in November, government data showed on Monday, a sign that corporate appetite for capital spending remained resilient despite pressure from soaring raw material prices.

The gain in core orders, a key indicator of capital expenditure, could be a relief to policymakers hoping for corporate investment to trigger a private demand-led recovery in the world’s third-largest economy.

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Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, grew 3.4% in November from October, rising for the second straight month, the Cabinet Office data showed.

It beat economists’ median estimate of a 1.4% rise and followed a 3.8% jump in the previous month.

However, Japanese firms could be cautious about boosting spending due to higher raw material, fuel and transportation costs that are sending wholesale inflation soaring and squeezing corporate margins.

“Firms may postpone capital spending from this quarter into the next fiscal year from April as uncertainty in the global economy has risen,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Due to a decline in coronavirus cases and an easing of the (global) chip shortage, orders from manufacturers recovered up to November, but the outlook is unclear.”

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A government official confirmed firms’ appetite for capital spending faced risks from rising raw material prices, though he added companies were still likely to spend on investments to strengthen their businesses for the future.

Compared with a year earlier, core orders, which exclude volatile numbers from shipping and electric power utilities, jumped 11.6% in November, the Cabinet office data found.

By sector, orders from manufacturers rose 12.9% month-on-month, offsetting a 0.8% drop in those from non-manufacturers, the data showed.

The government raised its assessment on machinery orders for the first time in six months, saying they showed signs of picking up. Previously, it said a pick-up in orders was showing signs of stalling.

After contracting in the third quarter of last year, Japan’s economy is expected to return to growth in the October-December quarter.

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The economy is forecast to show growth of an annualised 6.5% in that quarter, thanks largely to a projected pick-up in private consumption, which makes up more than half the economy, after an easing of coronavirus curbs.

(Reporting by Daniel Leussink; Editing by Kenneth Maxwell)

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Credit Suisse Chairman Horta-Osorio resigns after board probe into breach of COVID-19 rules

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January 17, 2022

SINGAPORE (Reuters) -Credit Suisse Chairman Antonio Horta-Osorio, who was being investigated by the bank’s board for breaching COVID-19 quarantine rules, has quit with immediate effect and board member Axel Lehmann has taken over the role.

Horta-Osorio’s resignation comes less than a year after he was brought in to clean up a corporate culture marred by Switzerland’s second-largest bank’s involvement with collapsed investment firm Archegos and insolvent supply chain finance firm Greensill Capital.

“I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally,” Horta-Osorio said in a statement issued by the bank in the early hours of Monday.

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“I therefore believe that my resignation is in the interest of the bank and its stakeholders at this crucial time.”

In late December, Reuters reported in an exclusive story that a preliminary investigation by Credit Suisse found that Horta-Osorio breached COVID-19 rules a second time.

He attended the Wimbledon tennis finals in July during a visit to Britain when the country’s COVID-19 rules required him to be in quarantine, Reuters cited sources as saying. [L1N2TF08K]

Credit Suisse said Lehmann, the board and the executive board would continue to implement Credit Suisse’s strategy.

(Reporting by Anshuman Daga in Singapore, Shivani Tanna and Maria Ponnezhath in Bengaluru; Editing by Himani Sarkar)

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